The ________ is a weighted average of the cost of funds which reflects the interrelationship of financing decisions.
A) risk premium
B) nominal cost
C) cost of capital
D) risk-free rate

Question

Quizplus · Accepted Answer

The cost of capital is a weighted average of the cost of different sources of funds such as equity, debt and other sources of financing, which reflects the interrelationship of financing decisions. It is used to determine the minimum rate of return that a company should achieve on its investments to create value for shareholders. A risk premium is the additional return that an investor demands for taking on additional risk. The nominal cost is the stated or nominal rate of interest or return. The risk-free rate is the theoretical interest rate of an investment with zero risk.

The ________ Is a Weighted Average of the Cost of Funds